SCR34 SD1.DOC

WHEREAS, the severe funding shortfall in Hawaii's retirement system for state and county employees is partially attributable to various employment and management practices that result in high non-base compensation of those employees; and

WHEREAS, those practices include "pension spiking" – the earning of substantially increased pay above base salaries and wages near the end of employees' careers that deprives the Employees' Retirement System of the contributions that would appropriately fund the pensions; and

WHEREAS, the high non-base compensation includes payment for overtime, compensatory time, differentials, and other supplemental pay for supervisors and managers as well as line staff; and

WHEREAS, while overtime may be authorized by supervisors, and some state and county services must be provided on a twenty-four hour basis and full shift coverage cannot be avoided, pension spiking is one factor in creating an unfunded liability of roughly $8,200,000 for the Employees' Retirement System; and

WHEREAS, the disproportionate contributions of "pension spikers" toward their own pension is exacerbated by the larger burden carried by those government entities with the smaller percentage of pensioners who have not spiked their pensions; and

WHEREAS, recent reports of state and county employees being paid for extensive amounts of overtime – such as the ten highest-paid emergency medical services employees in the City and County of Honolulu more than doubling their annual average base salary of $63,252 to an average of nearly $140,000 – have demonstrated the seriousness of the pension spiking problem; and

WHEREAS, in addition, the state Department of Public Safety has reported that seventy-five employees in fiscal year 2009 and twenty-five employees in fiscal year 2010 worked more than 1,000 hours of overtime, the equivalent of 125 eight-hour work days in a year, raising questions of how employees could sustain optimum performance, how these practices take place, and who participates; and

WHEREAS, these and other questionable personnel practices impact not only the Employees' Retirement System, but have a broader fiscal impact; and

WHEREAS, a recent investigation revealed that the State has overpaid its employees more than $2,000,000, with hundreds of thousands more in state tax dollars written off as uncollectable and other incorrect pay amounts recovered months or years later from employees who were mistakenly paid too much; and

WHEREAS, as of December 31, 2011, the overpaid wage balance owed to the State by its employees was more than $1,587,393, with some of these payments dating back to 1994; and

WHEREAS, the problem has persisted for so long that many state employees have retired or died while still owing the State thousands of dollars that they were overpaid in error; and

WHEREAS, as a result of the release of this and other information, legislators have received numerous constituent communications reporting government employee practices such as suspected abuse of sick leave; failure to report to work for prolonged periods of time, which has not resulted in denial of holiday pay, but in fact resulted in credit for vacation and sick leave as well; the manual nature of record keeping of government employees' presence or absence from work; the vandalizing of a prior attempt by one state department to automate employee record keeping; and other practices that strain credulity and have led to growing public outrage; and

WHEREAS, some of these public employee practices have been cited by directors and other top level managers as negotiated through the collective bargaining process and, therefore, have been treated as acceptable employee compensation practices; and

WHEREAS, while the focus of the investigative reporting has been on a limited number of government agencies, there is a strong possibility that similar practices are occurring throughout state and county government; and

WHEREAS, further information is needed to accurately assess the cost to taxpayers, the short- and long-term impact on the Employees' Retirement System, and how to address the problems; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-sixth Legislature of the State of Hawaii, Regular Session of 2012, the House of Representatives concurring, that the Auditor is requested to conduct audits of state department operations that result in high non-base compensation, pay for not working, and salary overpayments, including:

(1) A review of the use of overtime pay, and any excessive use of sick leave and other forms of compensation such as compensatory time, which may contribute to increased non-base compensation for employees, and the impact of the use of such non-base compensation on pension payments;

(2) A description of any specific instances of "pension spiking";

(3) An identification of any patterns of abuse of non-base compensation by employees or their supervisors;

(4) An identification of such practices as failure to report to work nevertheless resulting in current compensation and leave credits and in future favorable impact on pensions;

(5) The full extent of overpayments to state employees, the total amount repaid, amounts still eligible for repayment, and amounts deemed uncollectable, by department;

(6) Efforts by the State to resolve the overpayments through timely and aggressive collections;

(7) A review of state agencies' personnel policies regarding overtime, sick leave, leave without pay, and other forms of compensation;

(8) A review of collective bargaining agreements that address pay for not working; and

(9) Recommendations as appropriate; and

BE IT FURTHER RESOLVED that in conducting the audits, the Auditor may focus the initial efforts on those departments that have been identified as paying substantial non-base compensation to employees; have employees in bargaining units with collective bargaining contracts that enable such payments to occur; or have demonstrated contract management practices resulting in a pattern of overpayment of employees; and

BE IT FURTHER RESOLVED that the Auditor is requested to submit findings and recommendations to the Legislature no later than twenty days prior to the convening of the Regular Session of 2013; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Governor, the Auditor, and the Administrator of the Employees' Retirement System.

Report Title:

Audit; Overtime; Pension Spiking; Overpayment

THE SENATE	S.C.R. NO.	34
TWENTY-SIXTH LEGISLATURE, 2012		S.D. 1
STATE OF HAWAII